China Oil Giant's Income Rises as Costs Cut Amid Shift to Gas

China National Petroleum Corp., the country’s oil and gas behemoth, said first-half profit rose 11 percent and that spending cuts at the country’s largest field helped boost earnings.

The parent company of listed unit PetroChina Co. posted a profit of 27.58 billion yuan ($4.13 billion) in the six months ended June 30, according to a Beijing-based spokesman, who asked not to be identified, citing company policy. That compares with a profit 24.82 billion yuan a year ago, according to data compiled by Bloomberg. Sales were 853.4 billion yuan, according to the spokesman, versus 1.02 trillion yuan a year earlier.

“CNPC is doing what it can to cut costs, but low oil prices still sets a floor for how much the company can really make,” Tian Miao, an analyst with policy researcher North Square Blue Oak Ltd., said by phone. “PetroChina owns the best-quality assets of CNPC, including upstream, pipeline and refining, so improved CNPC earnings are a good sign that PetroChina may also report improved performance.”

The Economic Daily newspaper reported the results earlier Tuesday, without citing a source.

Changqing Output

CNPC saw “ better than expected” results in the first half, Chairman Wang Yilin said earlier this month, without providing details. “Operational performance” improved every month in the first six months, though the company’s crude oil business still posted a loss, according to Wang. The state-owned explorer will give priority to natural gas exploration and production in the second half of the year, he said.

China’s largest oil and gas producer said in a separate statement Tuesday that its Changqing field produced 26.5 million tons of oil equivalent in the six months through June and that the unit operating it posted a profit during that period, overcoming losses during January and February.

Changqing produced 11.76 million tons of crude (about 473,600 barrels a day), less than half the field’s total, while gas production reached 18.52 billion cubic meters. CNPC improved single-well output at Changqing and controlled production costs by investing the “lowest possible” amount in exploring for new reserves, the company said.

Brent crude, the global benchmark, averaged about $47 during the second quarter, up from about $35 during the first three months of the year. Prices during the first half of the year averaged about $41 a barrel, down roughly 30 percent from the same period in 2015.

PetroChina may break even in the first half on one-off gains and higher oil prices in the second quarter, Citigroup Inc. analysts including Graham Cunningham wrote in a July 15 research note. The listed unit posted a 13.8 billion yuan loss in the January to March period, its first-ever quarterly loss since listing in 2000. The company closed 1.3 percent lower at HK$5.28 on Tuesday, compared with a 0.6 percent gain in the city’s benchmark Hang Seng Index.

To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net Aaron Clark

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